Three parties, two deals, one government: the stress points within New Zealand's 'coalition of many colours'

It might have taken six weeks to decide the shape of New Zealand’s next government (or three if you count from the final results), but in the end that is the nature of proportional representation. Compromise, trade-offs and haggling are the price of an MMP electoral system designed to avoid single-party rule.

So, after some intermittently passive-agressive political posturing and much striding through airports, the deals were done and signed off in Wellington today. Both the ACT and NZ First parties have agreed, with exemptions, to National Party’s fiscal plan, tax plan and 100-day plan.

With two of the three coalition parties having run on campaign slogans about “taking back” the country and putting it “back on track”, there was a predictable sense of a return to policies of the past.

The Reserve Bank will again be focused on price stability, schools will be required to teach the basics, red tape and civil servant numbers will be cut, the “three strikes” provision will be restored to the Sentencing Act, te reo Māori in government agency names will be reduced, landlords will enjoy interest deductibility, and tax “relief” is again front and centre.

Not everyone got their way, of course. National has had to drop its plan to fund income tax cuts with a levy on foreign property buyers. And ACT’s proposed referendum on the Treaty of Waitangi becomes a Treaty Principles Bill that will go through the select committee process.

Unpredictable internal dynamics

Unsurprisingly, in this coalition of many colours, National secures the lion’s share of the 30 positions in the executive (including positions within and outside cabinet), holding 19 roles. ACT and NZ First both have three positions inside cabinet, with their leaders sharing the deputy prime minister role in turn.

Past coalitions have tended to comprise one major party flanked by a smaller partner on its left or right. Sometimes, too, those governments (single- or multi-party) have been supported on confidence and supply by parliamentary partners who formally sit outside cabinet but occasionally get executive spots.

But this will be the first formal three-party coalition New Zealand has had: one government based on two agreements wrapping together three parties. A government can only ever speak with a single voice, but this one has multiple moving parts.

It will also have an unpredictable internal dynamic. A single relationship between a senior and junior partner is one thing; this government has three discrete relationships, and they will not always be in harmony.

Incoming prime minister Christopher Luxon had the phrase “strength and stability” on high rotation during negotiations: the structural design of his government will test the bar he has set.

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Dispute resolution

The shape of the administration, and the chequered coalition history of NZ First leader Winston Peters, mean the processes put in place to ensure the effective day-to-day management of the government take on added significance.

Those arrangements are surprisingly thin. A coalition committee will monitor progress against the contents of both agreements. But it will only meet once during each House sitting period. This is a strategic committee, not one established to deal with the routine political challenges associated with keeping a three-way coalition on the rails.

Nor is it entirely clear how the daily conversations required in multi-party governments – including finding time on the legislative agenda to get through two coalition agreements’ worth of work, let alone all of the other policy challenges the next three years will deliver – are going to be structured. Surprisingly, there is no reference to holding regular meetings of the party leaders.

Instead, beyond a beige agreement to “undertake their best endeavours to achieve consensus on Cabinet decisions”, and the now standard MMP commitment to a “no surprises” policy, the parties’ respective chiefs of staff will be the key players.

They are the ones to whom disagreements between parties will be referred. Only if they cannot resolve the issue will the party leaders be drawn in. It is a reactive rather than an active model.

Beyond that, there is the standard commitment to maintain collective cabinet responsibility, and to the long-established “agree to disagree” provisions contained in the Cabinet Manual. And that’s it.

Potential fault lines

It is already possible to discern some of the challenges the coalition is going to face. The first will be finding an equilibrium point.

ACT’s more doctrinaire MPs will chafe at being dragged to the economic centre by NZ First. Likewise, NZ First’s social conservatives and economic nationalists will not enjoy aspects of ACT’s libertarianism.

Luxon will be constantly reminded that being a prime minister in a three-party coalition is not like being a corporate CEO – and not all his challenges will come from Peters or ACT leader David Seymour.

For instance, there will be National MPs who were spokespeople during the previous parliament but who now see an ACT or NZ First minister in “their” cabinet seat. In time, ambitious people who missed out on ministerial appointment can become restive.

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More broadly, tensions may well emerge between cabinet’s role as the centre of policy and political decision making and the prerogatives of individual ministers. It is not hard to envisage, say, a National minister pressing ahead with policy in their department rather than having always to run the coalition gauntlet in cabinet.

If this happens on any serious scale, not only will the fundamental principle of collective responsibility come under pressure, whole-of-government coordination (which is likely to be tested anyway by plans to cut the public service) will become challenging.

A loose federation of parties

Finally, small parties that prop up larger ones in office have often fared badly at the next election.

Having returned National to office in 1996, for example, NZ First came within 63 votes in Tauranga from tumbling out of parliament in 1999. In 2020, three years after installing a Labour-led government, it was turfed out.

ACT has no comparable record. But if the past is any guide, if polls start looking shaky for the smaller parties, watch for toys being ejected from political cots.

Today was all about the choreographed unveiling of a new government. But the extent to which the administration’s promises come to pass will depend on how the three parties get on once the gloss has come off and the pressure is on.

The coalition agreements are full of policy. But read the documents carefully and it is hard to escape the impression that, when it comes to the back-office arrangements that make governments tick, this is less a single government in lock-step than a loose governing federation of three parties. Now we get to find out if three parties can fit into one government.